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Real Estate Big Data

NAR Report: How the home search process has changed in 2020

(REAL ESTATE BIG DATA) The 2020 National Association of Realtors annual report examined the home search process, with buyers utilizing online tools and agents to help find the perfect home.

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Woman holding phone in lap, doing an online home search.

There’s extensive data and topics to research when it comes to the National Association of Realtors annual report – everything from the trust home sellers place in agents, home financing, home sales (naturally), and real estate professionals and their relationship with buyers. Practically every angle of this important market has been broken down and examined to help deliver a clear picture of real estate sales across the nation. It’s all extremely valuable and highly worth perusing (psst: search “NAR report”).

Of course, searching for a home is a pivotal and significant part of the entire process, and the NAR report has delivered an in-depth analysis of everything as well. Let’s take a look and see what current trends were revealed.

Initial Search

When it comes to looking for a home initially, there are two main options that most buyers tend to go with – searching online versus contacting outside help (primarily a real estate agent, but family and friends were also viable resources).

With the advent of the pandemic in 2020 keeping several people at home, online searches were at their all-time highest (though this trend has continued to increase in recent years). In fact, a staggering 97% of all buyers utilized the internet at some point during the process.

With the advent of the digital listings and databases, it’s been shown that 43% of buyers are first looking for properties online, compared to 18% that go to a real estate agent first. Speaking broadly, first time buyers were more likely to take this step first, and there was a direct increase as buyers were older (though this percentage decreases after the
age of 64).

First Step Taken During the Home Buying Process, First-time and Repeat Buyers

Real estate agents were definitely the second most used avenue during the search process, and this did increase with aging demographics as well. Perhaps due to greater familiarity with searching online, younger generations did look up information on buying their first home at a higher rate than older counterparts (13% with the younger group versus 6% with the oldest).

First Step Taken During Home Buying Process, by Age

Information Sources

Of course, when it comes to where to find information and best to listen to, real estate professionals reigned supreme (91% reported successfully being helped by agents), and were the primary resources for every demographic – first time buyers, repeat buyers, new homes, and previously owned homes. Online searches and open houses came second and third respectively, and yard signs and online video sites also saw a lot of utilization. Methods after this – print advertisements, billboards, relocation companies, and television sources – finished out the bottom, but there was a wide margin between them and other methods.

Information Sources Used in Home Search, by First Time and Repeat Buyers, and Buyers of New and Previously Owned Homes

Length of Time From Searching to Buying

Perhaps again owing to the nature of the pandemic, the average time a buyer used from search to purchase decreased (a first since 2014), needing only eight weeks. A median of nine homes were looked at (five online only).

First time buyers needed a little more time on average than repeat buyers (nine versus eight weeks). Agents were still utilized frequently in all instances, and were usually contacted within three weeks of the initial search.

Length of Home Search, by Region

Difficulty During the Process

It should come as no surprise that searching for a home is a massive undertaking, and can prove to be an arduous process given the magnitude of what it entails. Just finding the right home to purchase is seen as the most difficult step, with 53% of buyers saying it gave them the most trouble. Paperwork followed at 17%, while simply understanding the process from start to finish was cited by 15% of buyers. As might be expected, first time buyers reported more difficulty across the board in all areas than repeat buyers.

Most Difficult Steps of Home Buying Process by First Time and Repeat Buyers and Buyers of New and Previously Owned Homes

Online Searching Trends

Online searching was first examined in 1995, where only 2% of buyers would utilize the internet during their home search process. This increased repeatedly until 2009 to 90%, dipped slightly until 2012, and has since generally been rising. It was almost an even split between mobile and desktop devices, with younger buyers focusing more on mobile and older more likely to use a desktop/laptop.

Percentage of Time Using Devices in Home Search, by Age

There’s actually a lot of information to process when it comes to online search trends – married couples versus single buyers generally searched online more, desktop searches utilizing video sites more often than mobile (46% versus 40%), and mobile users generally finding their home through their online searches while desktop might generally direct buyers to complete the process with a real estate agent.

Value of Website Features

Of course, how a website helps direct a buyer is extraordinarily important to the home search process. Photos were the clear primary resource here, with 89% of buyers saying that images were extremely useful in the process.

Detailed information about properties followed at 86%, and then there was a significant jump to the next most important feature, as buyers reported that floor plans were important 67% of the time).

Value of Website Features

Next Steps After Searches

Once homes were found online that proved attractive, more than half of first (51%) and repeat (59%) buyers would proceed to walk through the home. Following this, buyers might then see the home but choose to skip seeing the inside (37%), or would contact a real estate agent for additional information (35%). First time buyers tended to look for more information in general (on the home itself, about mortgages, and so on) to better prepare themselves.

Actions Taken as a Result of Internet Home Search, First-Time and Repeat Buyers

Method of Home Purchases

Perhaps the best conclusion to draw here is the home purchase itself. When that time comes, agents are still used the overwhelming majority of the time regardless of a buyer using mobile or desktop more than 50% of the time. With the former, an agent helps 88% of the time, and 90% of the time otherwise. Builder agents or direct contact with the previously owner – known or not – are far overshadowed here.

Method of Home Purchase, by Use of Internet

Satisfaction with the Search Process

Given all of the tools and data available to buyers, 64% reported that they were very satisfied with the entire process, 30% were somewhat pleased, and the remaining group said they were unhappy.

Satisfaction with Buying Process

Conclusion

The NAR Report really shows an incredibly exhaustive look into the home search process. Generally speaking, with so much information available online, buyers were eager to search with devices first and speak with real estate agents early on in the process. Further, digital resources such as photos, floor plans, and other data proved incredibly useful in helping determine if buyers should seek out the home or continue their search.

Perhaps the best conclusions to draw here are that first and repeat home buyers are actively consuming data from online sources, but still rely heavily on agents to help guide them through the process (including ultimately with purchasing the home). Given the unique circumstances of the 2020 Pandemic, it’s clear that searches and next steps are best started through websites and other repositories, and are then usually followed with experts that can provide their professional experience. It’s likely that these trends will – on average – continue in ensuring years.

Robert Snodgrass has an English degree from Texas A&M University, and wants you to know that yes, that is actually a thing. And now he's doing something with it! Let us all join in on the experiment together. When he's not web developing at Docusign, he runs distances that routinely harm people and is the kind of giant nerd that says "you know, there's a King of the Hill episode that addresses this exact topic".

Real Estate Big Data

Real estate myths created during the pandemic

(REAL ESTATE BIG DATA) Real estate is a finicky field, but the most popular myths surrounding the effects of COVID-19 on the market are purely unfounded.

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real estate myths

In the past six months, there has undoubtedly been a large amount of misinformation regarding the Coronavirus, its treatment, and the long-term ramifications of a pandemic–a phenomenon that has affected, among other industries, real estate. Courtesy of SFGate, here are a few myths you’re likely to experience in the current market.

The first mythand, arguably, the most prevalent oneasserts that selling your home amidst COVID-19 restrictions is a poor choice. In fact, the opposite is true: Danielle Hale, a real estate expert, explains that people have been able to sell at relatively high rates despite the pandemic. “As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” she adds.

Of course, both taking the proper precautions during showings and maintaining social distancing–along with affording buyers an appropriate amount of grace when settling on a closing date–are important attributes of making a successful sale during this time.

Another myth you’ll probably hear about is tangentially connected to the first–that home prices are declining, thus making it, again, a bad time to sell. This is simply untrue; Lawrence Yun of the NAR points to low mortgage rates, as well as a general lack of people selling during this time, as the culprit. It makes sense that people would want to protect their investments for the time being, after all.

Thirdly, and lastly in the buying-and-selling myth pantheon, you’ll find that people are actually buying houses more now than they were before the pandemica direct answer to the myth that buyers are hesitant to close on properties for now. Just like the last item, you can look to low interest rates and high demand as the justification here.

Then, there is the myth that you can no longer tour homes in person seems real enough, and it may be standard practice for some sellers; however, the majority of homes being sold in the United States, as of now, are viewable in personand, more importantly, with the viewer’s safety at the forefront of the seller’s endeavors. However, SFGate does point out that, due to rising cases in much of the United States, some of these restrictions may eventually return.

Finally, the myth that buyers are actively attempting to leave cities in favor of suburb living seems to be circulating as of late. SFGate acknowledges that this myth is “partly true”, but that doesn’t mean city listings aren’t availablenor does it mean city dwellings will begin to lose their value. After all, urban living has consisted of largely prime real estate for as long as any of us can remember, and the Coronavirus probably won’t outlast that allure.

The bottom line is this: Real estate, like everything else, has been affected by COVID-19but it hasn’t been completely turned on its head and wiped out like some may think.

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Real Estate Big Data

2020 NAR Report: Breaking down For Sale by Owner (FSBO) homes

(REAL ESTATE BIG DATA) The 2020 NAR Report analyzes how For Sale By Owner (FSBO) sales have been affected in 2020, and what that could mean going into 2021.

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Home owners browsing online for FSBO home selling

At the beginning of 2020, the housing market started off strong. While there was a nine-week downturn at the onset of the pandemic, sales resumed and have continued an upward trend through the rest of the year, resulting in higher prices (jumping 14.6%). This increased demand has been primarily driven by lower mortgage rates and employees working from home (which in turn means a reassessment of where people want to live, with many opting away from cities given that their personal choice is now more easily obtainable).

It has not been entirely beneficial at all times, however, with sales declining for the first time in six months, due to lower inventory and the aforementioned rising costs. Still, this suggests that the market has continued to flourish.

The National Association of Realtors began tracking various trends for home real estate in 1981 with a total of 59 questions designed to understand the market over a twelve month period from July to June. In doing so, a snapshot of the current landscape was obtained for that year, and this data has since been collected annually. Further, it has grown to include additional considerations, covering a massive 131 questions in the most recent 2020 report.

Of the numerous subjects covered, for sale by owner sales (i.e., without assistance from a realtor) are directly profiled. This FSBO information is collected here, and several insights can be gleaned with regard to this particular selling method.

As this report shows, there are certain circumstances that – when tracked across the entire survey – show positive outcomes. A quick example is that not having a previous relationship with the buyer yields higher selling prices and a smaller percentage of times where the asking price was reduced. Interestingly, data also shows a seller’s starting median income being higher than situations where there was a previous relationship with the buyer.

Let’s take a deeper look into this specific topic.

For Sale By Owner Sales Show Steady Decrease Since Inception
In 1981, FSBO sales accounted for as much as 15%, but this has declined gradually over time, accounting for only 8% in 2020 (though this is up 1% from the previous year). Additional analysis showed that these sales were evenly split between the buyers and sellers having a previous relationship versus not, with the latter as generally more advantageous toward the seller. Sales mostly came from suburban and urban locations (as opposed to recreational and resort territories).

FSBO and Agent Assisted Sales 2003-2020
FSBO and Agent Assisted Sales, by Location

Demographics Breakdown – Median Income
In comparison to agent-assisted sales, FSBO owners differ on a number of data points that are significant. For example, FSBO sellers had a median age of 57, which is just above agent-assisted sellers at 56. Further, their median income is over ten thousand dollars lower ($96,700 vs $108,300), which falls even further if an agent was used later in the process after an initial attempt at a self-sale ($79,000).

Interestingly, there is a correlation between higher median seller income when it comes to selling their home to someone where no previous relationship existed ($107,800 versus $84,200).

Characteristics of FSBO and Agent Assisted Sellers

Types of Homes Sold
The majority are detached single-family homes at 81%; there is a small dip to 78% (down from 82% in 2019) with regard to FSBO sales. The main differences here are that FSBO shows a lower percentage of townhouse sales (6% versus 3%) but an increase overall in mobile/manufactured homes (3% versus 9%).

We also still see differences when a previous relationship is not present – there’s an increase in townhouses and mobile/manufactured homes and a decrease in detached single-family. Otherwise, both groups are comparable.

Type of Home Sold, FSBO and Agent Assisted Sellers

Home Location
FSBO sales tend to skew slightly higher in rural areas compared to agent-assisted transactions, though there is a significant difference in resort/recreational sales for those who do not have a prior relationship.

Location of Home Sold, FSBO and Agent Assisted Sellers

Selling Price
Overall, FSBO sales result in a lower median price than with agents ($217,900 versus $295,000), but there has been an increase in the price over 2019 (rising up from $200,000). It’s worth noting that agents will take a percentage of the sale as commission (around 1%). In situations where an agent was employed after an initial attempt at a direct sale, the owner would receive 98% of the asking price, but usually had to reduce their listing before a deal could be made.

In short, this does seem to suggest that an agent’s knowledge of the market and skillset can benefit a seller.

Selling Price, FSBO and Agent-Assisted Sellers

Factors That Determined Selling Price
When settling on an initial listing, FSBOs who knew their buyers tended to focus on comparables in their area 41% of the time. Other methods trailed behind, such as appraisals (32%), profit needed by seller (29%), online evaluation tools (21%), and covering what was owed (15%). Those who did not know their buyer saw an increase when relying on comparables (56%).

How FSBO Seller Determined Asking Price of Home Sold

Length of Time on Market
One of the most important factors in real estate is the amount of time a home will be on the market until it is sold. In this regard, FSBO sales have a slight edge, with an average duration of two weeks (with agents having a median of three weeks). This is increased when the seller knows the buyer, with an average just under a week, rising by 6 points in 2020 to 52%.

As such, homes sold by FSBO tend to move more quickly, and knowing the buyer beforehand accelerates the process.

Time on Market, FSBO and Agent-Assisted Sellers

Remaining Factors – Urgency, Incentives
Compared to agent-assisted sales, FSBO tended to be less urgent overall, with over half saying they did not need to sell urgently regardless of knowing the buyer (52%) or not (64%). There was also a lower tendency to give incentives to the buyer in these conditions, as all FSBO sales offered nothing 85% of the time.

Seller Urgency, FSBO and Agent-Assisted Sellers
Incentives offered to attract buyers, FSBO and Agent-Assisted Sellers

Reason For Selling as FSBO
A majority of owners chose this route due to not wanting to pay a commission or fee, citing this reason as 41% of the time. Selling to a relative, friend, or neighbor was the next most frequent reason, covering 30% of all FSBO sales.

Regardless of why an owner was selling, there was almost always a large disparity between knowing the buyer versus not. This is most pronounced in situations where the buyer contacted the seller directly – 6% of sales versus 22%.

Most Important Reason for Selling Home as FSBO

Method For Selling
Interestingly, a majority of FSBO sales utilized no active methods for marketing their home at 46%, with a large discrepancy between knowing the buyer (68%) versus not (24%). Selling to a friend, relative, or neighbor occurred 22% of the time, while third party aggregators such as Zillow and Redfin were at 24%. Yard signs covered 25%.

When the buyer was not known, the owner relied much more heavily on third parties, social networking sites (such as Facebook), yard signs, and open houses. This would follow given that more work would need to be done to locate a buyer. We can see from the data that third parties are becoming more and more utilized when there is no prior relationship, which would tie into the real estate market becoming more intertwined with digital methods.

Method Used by FSBO Sellers to Market Home

What did FSBO sellers say?
While 8 in 10 successful FSBO sales reported being very satisfied with the process to sell their home. 53% reported that there was nothing truly difficult or arduous when it came to the selling process, which far outshone other reasons such as preparation, completing paperwork, price adjustments, and attracting buyers.

Most Difficult Task for FSBO Sellers

When they knew the buyer, 16% said they would sell their current home when the time arose, while 45% who didn’t know the buyer reported the same. This would suggest that this method is overall successful and attractive, despite that over a third reported not knowing what process they’d take with their current home.

How FSBO Sellers will sell their current home

Conclusion
Both types of sellers were overwhelmingly satisfied with the process they used to sell their homes, with 81% and 83% responding with “very satisfied.” Despite some of the perceived additional challenges and the foregoing of an experienced realtor, it suggests that FSBO works a large part of the time for owners.

FSBO Sellers Satisfaction Process of Selling Homes

With the advent of third parties and social networking, a greater wealth of knowledge accessible via the internet (looking up comparables, recently sold homes, guidance from other home sellers and realtors, etc.), and a rich inventory of resources available, home owners can conceivably move forward with selling their home directly and still enjoy positive results.

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Real Estate Big Data

NAR Report: Despite tech, agents connection and trust ranks high

(REAL ESTATE BIG DATA) Even as technology is transforming the real estate industry, home sellers are seeking agents with personal connections, trust, and a high level of service.

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Agents sitting at a table negotiating a deal

When it comes to how sellers and real estate professionals and agents are working together these days, surveys say things are going pretty well.

For its updated relationship check in, the National Association of Realtors asked recent home sellers who closed from July, 2019, through June, 2020, about how their sales process went.

Here are some of the main takeaways from NAR’s “2020 Profile of Home Buyers and Sellers.”

It’s still all about referrals and personal networks.

Asking friends, family, or relatives to recommend an agent – or knowing their agent personally – is by far the most common way sellers find someone to work with. Furthermore, 67% of all sellers either got a recommendation for, had a personal relationship with, or had previously worked with the agent. Referrals and relationships were the most common for first-time sellers, at 46%; for repeat sellers, 28% chose based on past experience.

Method Used to Find Real Estate Agent, by First Time or Repeat Seller

Sellers aren’t shopping around much.

Perhaps related to the high number of people who were referred to or knew their agent, 77% of recent sellers talked to just one agent before making a decision; 13% contacted two.

Most sellers who stayed nearby used the same agent to buy their next home.

While 54% of sellers overall used the same agent, there was a big difference when comparing that to the number of miles sellers moved away: More than 80% of sellers who moved 20 or fewer miles away used the same agent. The majority of sellers who moved more than 50 miles away chose a different agent.

MLS is even bigger in marketing, but yard signs are still popping up.

When it came to marketing, 91% of sellers said their homes were listed on the Multiple Listing Service (MLS), an increase from 2019, NAR notes. Only 2% of sellers surveyed stayed off MLS.

Among sellers who worked with an agent, 88% reported being on MLS. Agents also posted yard signs (68%) and held an open house (53%). Online listings on realtor.com, the agent’s own website, and third-party aggregators were used about half the time. Only 22% of agents posted listings on social media.

When it comes to marketing, however, the 2020 report also shows changing trends in strategies spurred by the onset of the COVID-19 epidemic. In the period from April through June, 2020, the use of open houses fell by 12 percentage points, while virtual tours and videos climbed by 16 points. Buyers are now doing more research on their own and touring fewer properties.

Methods Real Estate Agent Used to Market Home

Agents are providing more services than ever before.

NAR also looked at how much sellers asked their agents to do, from selling the house within a certain timeframe to pricing, negotiation, marketing, help with paperwork, and more.

According to the report, “88% of sellers reported that their agents provided the lion’s share of these services, the highest historical share recorded.” From 2006 to 2019, the average was 81% of sellers saying their agents provided a broad range of services, but that’s been climbing every year since 2017.

Only 6% of sellers said they had asked agents to provide a limited list of services. The same percentage applied to sellers who said they just wanted the agent to list on MLS and little else.

Level of Service Provided by the Real Estate Agent

The top services all sellers wanted was help selling their home within a specific timeframe (22%) and help pricing the home competitively (21%). However, how sellers ranked services differed depending on how much they had asked agents to do. The previous percentages were reversed for sellers whose agents provided a range of services and managed the sales process. For sellers who asked agents to provide limited services on request, the most important service was help finding a buyer. For those who just wanted the agent to list on MLS, sellers most wanted help with marketing.

What Sellers Most Want from Real Estate Agents, by level of service provided by the Agent

A good reputation and integrity get clients.

When it came to 31% of sellers, they said an agent’s reputation was the most important factor in choosing an agent. For 26%, the most valued trait was trustworthiness and honesty. For 15%, the most important consideration was that the agent was a friend or family member.

Most Important Factor in Choosing Real Estate Agent to Sell Home, by level of service provided by the agent

Sellers paying commissions is still standard.

When it comes to paying agents, it still falls on the seller’s shoulders. Seventy-seven percent of agents were paid by sellers alone, while 11% were paid by the buyer and the seller, and 6% were paid only by the buyer. Only 3% of sellers paid a flat fee.

It falls mostly to the agent to get that conversation started. For 41% of sellers, they said their agent brought it up, but 23% of sellers said they had brought it up and were able to negotiate the commission or fee. Not everyone asked, though. When it came to 28% of sellers, they either knew compensation was negotiable but didn’t ask or didn’t even know that was possible. Only 5% of agents were not willing or able to negotiate.

Negotiating the Commission Rate or Fee with the Real Estate Agent

Sellers gave their agents high marks.

While every agent wants a 100% satisfaction rating from clients, the 89% of sellers who said they would “definitely” or “probably” return to or recommend their agent isn’t too shabby. Satisfaction with agents was highest for those who helped sellers buy homes within 20 or fewer miles.

For many agents, that satisfaction turned into referrals. Although 33% of sellers reported no referrals, 41% had recommended their agent from one to three times, while an enthusiastic 27% had done so four or more times. The median number of times sellers made recommendations was two.

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